OnTheMarket plc (LON:OTMP) Chief Executive Officer Ian Springett caught up with DirectorsTalk for an exclusive interview to discuss targets, the market size and market players, 3-fold and 4-fold increases in visitors leads and continuing the rise of leads going forward.
Q1: Your first-year anniversary since IPO will be February 2019, what was your guided target to shareholders for total UK agents signed up just after one year?
A1: Our broker, Zeus Capital put out some research which, I think was at the beginning of June, had us reaching 12,500 by the end of our financial year in January 2019 and we were comfortable with that figure.
Q2: So, you’re impressively ahead of target, do you have a newly revised target above 12,000?
A2: I don’t think I can give a re-forecast on the hoof, we are in the run in to publication of our half year results, I think anything we want to say on that we will say then, I think.
Q3: Can you talk about the total market size, the market players and what 11,000 agents means in the scale of things for your plan going forward?
A3: The total size of the UK estate and lettings market is quite hard to pin down, estimates seem to range between 18,500 to 19,500 offices in total but that includes a lot of very small entities which come and go from the market. It also depends how portals choose to interpret the listings from hybrids and convert them into what the call office equivalents.
We tend to benchmark ourselves against Rightmove which, in its published statements, consistently has around 17,500 agent offices listed with it. So, our 11,000 offices now put us around 63% of what Rightmove has. As far as Zoopla is concerned, now it’s under private equity ownership, we’re not able to benchmark as easily against them but before the change of ownership, they published half year results to the end of March and at that time stated they had 15,264 agencies on the portal.
As far as we’re concerned, we continue to see a strong appetite among independent agents to support an agent-backed portal and there are still plenty to bring on board over the coming months. It’s important to say that the independent sector is by far in the way the largest part of the market, so I think something like 65% of all offices are in firms with 1-3 offices and 78% of agent offices are in firms with less than 20 offices. So, it really is a market dominated by the independent sector.
Q4: Last time we spoke you highlighted you speak to agents big and small daily, what’s the biggest challenge that agents have right now?
A4: There’s pressure on income, margins and costs. Transaction volumes remain subdued in the market, but agents are facing very heavy competition for new instructions, arguably the market is somewhat oversupplied with agency services and of course the hybrid offerings, the fixed-fee players, bring further margin pressures as well. So, commission levels are reducing in many cases.
In terms of income, the tenant fees ban will have a major impact on income for lettings agents who may need to find ways to replace that income or radically reduce costs. Good staff are an expensive commodity and scares and, of course, agents continue to face annual double-digit increases in their fees to Rightmove which, in a lot of cases, now appear to now be exceeding what they pay in office rents.
Nonetheless, good agents will be able to navigate these challenges and it’ll be interesting to see how the independent high street agents, as a very large group, fair in market share terms, and we’re beginning to have a look at that.
Q5: There seems to be a 3-fold increase in visitors and a 4-fold increase in leads, I think this reflects the doubling in agent branches and properties available for sale. Can you comment on how OnTheMarket has facilitated this increase and how it’ll help the number of leads to continue rising?
A5: At IPO, OnTheMarket already had an established traffic base so the rapid addition of many more agents, in line with strategy, and of course properties to the portal meant consumers that we were already engaged with were offered more suitable properties meeting their criteria when they were searching. That alone has had the effect of increasing lead generation.
I remember back when you interviewed me in May, our expectation then was that we would continue to grow agent and property numbers rapidly which has been driven by free trial offers which don’t run off until next year largely. At the same, we were looking to progressively build up investment in marketing and growing our consumer audience, so not putting the pedal to the metal too early in terms of marketing spend until the property listings have built up a good market share.
Now that we’ve reached that point, we do anticipate accelerating the market investment and this has worked well as a strategy, increasing our leads in September compared with February is a product of lots more consumers now looking at many more properties.
For us, the added driver has been that consumers are increasingly understanding that we receive thousands of new listings every month before they are listed on Rightmove or Zoopla and we are growing the number of property alerts that consumers have set up. So, the reality is they are getting those properties in advance of receiving them through any other route so that is helping us drive a much greater lead generation. That is a message we have highlighted even further in our new TV campaign which commenced in September.
We certainly sense that we can continue momentum in the growth of all the key things so agents listing, properties listing, the number of new properties added on a ‘new and exclusive’ basis, visits to the portal, repeat engagement by property seekers and of course, the essential leads generation to agents. What I think also is that our new brand marketing campaigns, both television and outdoor posters on buses and so forth, will help build awareness and appreciation of OnTheMarket across the broader public rather than just people who are actively in the market right now which is obviously the primary target.